August 1,2002

V
Statementof TechnicalandPhysicalWork carriedout on the
Roy Group mineralclaims, August9,200l to August 8,2002

TechnicalTestMining Prouram - Exnloration

1. Excavatingandprocessingin test mine areafor coal andbentoniteasa secondary

product - BasinCoal Project. Selectivemining of coal, wasteandbentoniteproduct site
work August7 - 30,200l andreport compilationSeptember2001.

TOTAL EXPENDITURE $99.747.00

(Detailedin enclosedreport)
Reportpreparation $ 5.000.00

Allow 20% of Expenditureattributedto the mineralclaims,

evaluationof bentonite. $421.000.00

Mav 1.2002. PhvsicalWork

2. Travel to Roy claimsPrinceton,with WesternIndustrialClay Ltd., Field Supervisor,
E.W. BeresfordandL. Belik, Mine Manager,May 1,2002. Spotsampledbentonitefrom
in-seamtrenchesandstockpilesfor marketingand analysis.

E.W. Beresford,P.Eng.@ $500.00per day $ 500.00

L. Belik, Mine Manager@$400.00per day 400.00
Travelto site 385km @ 42centskm 162.00
Rental of QuadATV to get to site (1 day) 600.00
Meals 80.00

$1.742.00

3. June24/25.2002 - TechnicalWork
Identify bentonitein cores,measureandtake detail analysisof 9 drill holesin core
storagebuilding. Draw sections(enclosed),recordbentonitepartings.

E.W. Beresford $ 500.00

M.G. Harrison 500.00
L. Belik 400.00
Travel to Princeton/returnKamloops 162.00
Meals, miscellaneousexpense,printing 200.00
Offtce time, drawing out sections(2 days)
E.W. Beresford 1.000.00

$2.762.00
 ..I2

Total Expenditurefor TechnicalandPhysicalWork on the Roy Claims carriedout

betweenAugust9,200l andAugust8,2002

TOTAL $25.504.00

I declarethe abovework and cost statementsto be a time recordof work carriedout on the
Roy Group in 2OOU2002.

E. W. Beresford,P.Eng.
FMC # 142962 u
August2,2002
 COMPLIANCE COAL CORPORATION
BASIN COAL PROJECT
TEST MINING PROGRAM

TABLE OF CONTENTS

1.0 INTRODUCTION 3
20 TESTPLAN 3
3.0 TEST SCHEDULE 4
4.0 TEsTMlNlNG 7
4.1 Fquipment Selection for Test Mining 7
4.2 Mobion and Equi~ent udlization 8
4.3 Grubbing 10
4.4 Topsoil 10
4.5 Overburden (Rock) 10
4.6 Hanging Wall Coal Zone (2.5 M Thick) 11
4.7 Bentonite (1 M Thick) and Waste Zones 14
4.8 Mid Seam Zone A (2.4 M Thick) 14
4.9 Mid Scam Zone B (3.4 M Thick) 14
4.10 High Ash Zone (5.95 M Thick) 15
4.11 Footmall Coal Zone (4.45 M Thick) 15
5.0 TEST SAMPLING 17
5.1 Sampling Methodology 17
5.2 Sampling QA/QC 20
5.3 Specific Gravity/Bulk Density 20
6.0 GEOTRCHNICAL 20
6.1 R&lability 20
6.2 cut Slopes 20~
6.3 Hydrology 21
7.0 TEST PROCESSING 21
8.0 DEMOBILIZATION 21
 COMPLIANCE COAL COBPOBATION - BASlN COAL PROJECT
~‘EsTM~N~NGPROGRAM

10.0 OPERATING COSTS 22

11.0 CAPITAL COSTS 23
12.0 CONCLUSIONS AND RECOMMENDATIONS 23

TABLES

Tablel-PropasedTcstMining~Schodule-Budget
Table 2 -Actual Test Mining Pmgram Schedule - Budget
Table3-CoalSummaryforBH#RS98-4
Table4-TestMiningCoalAnalysis
Table 5 -Bulk Sampk Screen Analysis
Table 6 -Comparative Sample Analysis
Table7-OpemtingCostsSummary

Figure I- Mine Pkn Schematic

FigurcZ-CodSeamZones

APPENDIX

Appendix 1 -Progress Picturea

 COMPLIANCE COAL CORPORATlON - RUIN COAL PROJECT
TESTMPWGPROGRAM

1.0 INTRODUCTION

On August 7- 30, 2001, Compliance Coal Corporation (“Compliance”) commenced a

programtotestmineaportianofthcBaainCoalDepositlocatednearCoalmoat
southwestern British Columbia Tbis mining program was conducted to complete the
following objectives:

1. Evaluate the rippability of waste rock.

2. Totestselectiveminingofsevemlcoalseamswithintbemsource andremovetlle
rock partings.
3. Simulate proposed mining methods,
4. Assess equipment selection.
5. confirm the coal seam eoIltimlity.
6. Establish procedures for sampling and analysis of the coal.
7. Collect a bulk sample of coal for customer testing.
8. Determine a reasonable indication of operating costs.
9. Test the integrity of a constructed plant site pad.
10. Develop a relationship with local contractors, vendors and suppliers.
11. Producea mar&table raw coal product
12. Selectively mine bentonite from the coal seam.

2.0 TEST PLAN

During the second quarter of 2001, Compliance reached an agreement with Pacific West
Coal Ltd. (“PWC”) to explore, develop and mine coal from their hcences. As part of
Compliance’s plan to develop the project, a test program was implemented to addtess
several criteria for the &sign of a full-scale mining plan. The information collected during
test mining was needed for the feasibility study on the project.

The plan was designed to achieve all of the above objectives by mining and collecting an
edmated 10,000 tonnes of selectively mined raw coal. Equipment used to cokct this
material was chosen too simulate the proposed actual equipment for full-scale production.

September 2001 Page 3

i !?l

COMPLUNCE COAL CORPORATlON - RASlN COAL PROJECT

TESTMINlNGPROGR+l

3.0 TFSTSCHEDULE

The proposed schdole for the test program is p-ted in Table 1. This schedule involved
sitsworlr~inlateJulyaodbeingcanpletedettheendofAugueL Thaactualstmt
dateatthesitewasAugust7.

TheactualscbeduleispcesentediaTable2. Atotalof20dayswaremquircdtotidly
complete the test program.

Weather throughout the progrsm was very favourable and no adverse surprises w
encouatemd. Alleqoipmcotnccdcdforthepmjcctwaslcascdfmmlocalcootrsaon,
which involved low mobilbation costa. The DB dozer available WBSequipped with a rock
blade rather thau a U-blade, which would have mduced tha mining the.

september2001
 t I I
I I I I I I I I I , I I , l , l t 110, I I
I .I I , II I ,I I I I I I I :I, 1.c
.I 4, I I I I I , , , , , , , c.,s ‘~
a, *
1 i;i i i i i i i i i i i 4% t
I I I I I I I I I I Sl8I I I , I I I , I 12.,*-

/ / / j i i i i / i i i 8,s ,
 Table 2 - Actual Test Mining Program Schedule - Budget
r-Actual

I , s, I, v, e, , , I
al
^~ . I 1 II I I I 18lII IIIIIIII
I 1131 I I I I I I I I I I I I I I I “I q
I ! II I 1 , 1.0, 61 , , , ’ ’ ’ ’ 1 ’ ’

I.. ,
1.- --
--’ ” ‘-n I I II I I I III1 IIIII/II 1IIIlll
l;l:l IIIIIiII lIIlll1~~
“..A
_- ! ._! !! I I -I I114181IIlIilI lllllll~
w
Table 3 - Typical Coal SeCtiOn

Coal Summary-BH No. RS 98-4

Bulk Sample Weighted Average

 COMPLIANCE COAL COBPORATlON - BASM COAL PROJECT
TEST MINING PROGRAM

4.0 TESTMINING

TheprogramwaseomplmdinsevetalsEngessimilartoowhatwwldbe~uiredfor~-
scale mining. The iirst ste-prequired tha mobilization of contractor equipment to sita.
After equipment arrival, site pmpamtion iucluding grubbing, topsoil removal aud rock
overburden stripping were completed.

SelaaiveminineofsevaalcoalzoneswasoompletedusingaCatD-8R~aadCat322
excavator. The method of test mining by ripping, pushing, loading, hauling and dumping is
similar to proposed Ml-scale mining.

Overall,testminhgwasasuccessindetemkhg:

1. AllmataialsarerippablcusingatwotoothripperoaaCatD8Rdo~,
2. Selective mining is feasible to hcrease Run-of-Mine (ROM) coal quality,
3. Equipncntandthe~usadwas-~andissimilartothat~~for
foil-scale mining,
4. coalwasfolmdtobeconthuousaudconsisten~
5. The selected local contractors were found to be very cooperative and although not
skilled in coal mining, very quick to learn.
6. The length of pushing overburden with the domr was longer than planued and more
rook tbaa,auticipated to establish a suitable pad for the uxeening plant and stockpile
needed.

4.1 Equipment Selection for Test Mining

All selected equipment for test mining was contractor owned and operated. The
equipment included a Cat DSR dozer, and Cat 322 Excavator and a Cat 966
Loader.

September 2001
 COMPLIANCE COA%L.C&O~~~~&~ COAL PROJECf

4.2 Mobilization and Equipment Utilization

On August 7,2001, equipment was mobilized to the site with the arrival of a Cat D-
8R dozr and a Cat 322 excavator. All mobile equipment was transported by low-
bed except the screensand conveyors, which were towed to the site.

The plant mobilization on August 14&, 2001 in a time of 3 hours aad utilized the
loader. The coo&actor included the labour and operated the screen plant and
rwckeropemtioll.

Thefirstprioritywastop~the-ningplantpadandexposethe~seam
for mining. A contractor Cat D-8 dozer and Cat 322 excavator was used to
complete these tasks.

After minor site preparation, a Cat D-8R Dozer with rock blade and two-shank
ripper was utilized to remove overburden and push the coal from various seams to a
feed pile for the screening plant.

A Cat 322 excavator with a 2% yard bucket (teeth) was instrumental in completing
the hanging-wall cleanup work and preparing the coal ulnes to be pushed by the
dozer. Some coal seams were too narrow for the dozer, therefore, the excavator
wasusedtoremovethecoaltiomthewastepartings.

Oncethecoalwasminedaadstockpiled,itwasfedintoascreeningplantbyaCat
966F Loader with a 5-yard bucket. The coal was processed with a 100 tonne per
hour Power Screen with a 6” plus grizzly, a 3” plus deck screen, and stacked with a
65’ stacker (Figure 1 - Mine Plan Schematic). The Power Screen was powered by
diesel engine providing hydraulic power to the screen and stacker.

Three major bentonite partings within the main coal seam were selectively
mined and stockpiled for a major testing and marketing sampling program.

‘CI
September 2001
 COMPLLMICE COAL CORPORATlON - RASIN COAL PROJECT
TEST MINING PROGRAM

4.3 G~bbiig

The site had been recently logged by Tolko Industries, a logging company, but soils
~dbrushhadtoberemoved~stockpiled.Thismsuedthcintcgrityof~
dg plant pad. The contractor was utilized to complete this work. Total time
to complete this was:

Jkz.er Time: 6 hours

Excavator Time: 7.5 hours

4.4 Topaofl

Approximately 0.5 metxe thick of topsoil was pushed by dozer up slope from the
proposed mining area and stockpiled for reclamation purposes. and to provide a
safety berm. The contractor was utilized to complete tbis work. Total time to
complete this was:

:Dozer Tlle: 2.5 hours

‘Volume: 100 cubic metres of soil

4.5 Overburden (Rock)

The coal seam was close to the surface and approximately 1.5 me&s of bloom
(heavily weathered rock and coal) were removed with the overbordeo. The
overburden was composed of thinly laminated shales,mudstones, and sandstones.

The test site was 120 metres long; 70 mctres south of the existing trench #4. This
allowed the dozer to work two areasand sequenceoverburden removal with respect
to the coal seams.
The south section of overburden was dozer ripped and pushed to form a flat pad of
approximately 9,000 squaremetres.

An excavator was used to do final haoging wall cleanup along the coal seam and
cast the rock away 6nm the coal seam for the dozer access.A contractor was used
to complctc this work for a total time of:

September 2001 Page 10

 COMPLIANCE COAL CORPORATION - RAtEN COAL PROJECT
TEST MtN&NG PROGRAM

Dozer Time: 109 hours

Excavator Time: 53.5 hours
(inohtdes 10 hours to grub, buikl and ditch acoess to the pad from the
existing road)
Volume: 27,625 cubic me&s of overburden

4.6 Hanging Wall Coal Zone (2.5 M Thick)

ThepropTeosionoftestminingwas~mtheHangingWallcoalzOne(outrrmost
exposed coal) to the Footwrdl Coal Zone (inuer most coal). Refer to Figure 2 for
stratigraphic sequencesof xones. Test mining was impbxnemed proxbnal to BH #
RS 984 where previously collected data could be verified (Table 3).

After stripping of the overburden was completed, excavation began on the Hauging
Wag Coal Zone (HWCZ). A 1.5 metres - of bentordte was encountered above
the zone and was selectively removed by the excavator. Next, a 0.6 metre wide of
saudstoneparting, which was the hardest rock encountered, had to be ripped before
the excavator could selectively removed it. The sandstone mpamted tiom the
underlying coal - quite well which left a zone 2.5 metres thick of recoverable
coal(HWCZ). Thesttikelmgthofthis~~shortencdduetoitsoutcropiagat
pad grade on the south end and 2 metres of bloom had to be removed from the
entiresouthendofthe-. Theheightofthecoal-slopedfiomgradeatthe
southendto10metresdeepatthenorthendofthcsouthemhalfofthetestarea
All work was completed by the contractor for a total time of:

Jhzcr Time: 3hlrs

Excavator Time: 9 hours

Volume: 700 banked cubic metres of coal at au

estimated 27% ash
Sampling Results show 28% Ash (Table 4)

September 2001 Page 11

 COMPLUNCE COAL CORPORATION - MSlN COAL PBOJECT
TESTMININGPBGGBAM

4.7 Be&mite (1 M Tkick) and Waste Zones

Immediatelybelow the HWCZ wus 1 metm of bentonite,which was not uniform

anddiffbmlt to follow. Immediatelybelow the bentonitewas a 0.35-metrezoneof
cd with 52% ashcontent. Both the irregularkentonitebedandhigh eshcoal were
removedtogetherandwasted.

The zonewas removedwith the excavatorand piled using the dozg at the north
interim wall betweenthe north and south sectionof the test site. The contractor
completedthisumrkim

Don Time: 2.5 hours

ExcavatorTime: 14hours
Volume: 300 be&cd cubicme.tmsof waste.

4.8 Mid Seam Zone A (2.4 M Thick)

Below the bentonitewas the 2.4 mctrc thick Mid ScamZone A. This zone was
minedusingthedoz4x. Amber- - noted during excavation,which
typically inc- the heatvalueof coal. Total contractortime was:

DozerTime: shours
ExcavatorTie: 3hom.s
Volume: 1OOObaakedcubicmetresofcoalat21%ash
SamplingResultsshow 18.5%Ash (SeeSampleTable4)

4.9 Mid SeamZone B (3.4 M Thick)

Arock(waste)partingof0.5metresseparatedMidSeamA&BZoncs. Itwas
removedwith the excavatorand piled with the dozer againstthe north interim pit
wall. The excavatoroperatorhad to be selectivein cleaningthe 3.4 metresthick
Mid SeamZone B as the waste parting was not consistent. Total contractortime
was:
DozerTime: 7.5 hours
ExcavatorTime: 6.5 hours

September 2001 Page 14

 COMPLIANCE COAL CORPORATION - BASIN COAL PROJECI-
TEST MINJNG PROGRAM

Volume: 1800 cubic metres of coal at 21.5% ash

Sampling Rrsults show 21-% Ash (See Sample Table 4)

4.10 High Ash Zone (5.95 lb%Tbiek)

This zone was dehed by a high volume of partings between thin layw of coal.
Theashcontentmngedbetween35-50%. Thepadhadtoteextendedtothesouth
to accommodate the volume of the high ash zone and was pushed far enough to
allow recovery of the Footwall Zone. Tbebighashzonewas-vedintbree
shorter sections to allow tbe footwall coal to be removed and the next section of
high ash to be pushed into its place. Totel contractor time was:

Dozer Tie: 29.5 hours

Excavator Time: 20 hours
L,oder Time: 3 hours
(both loader and excavator were used tomstack the high ash zone due to its
high volume)
Volume: 4000 banked cubic me&es of high ash coal

4.11 Footwall Coal Zone (4.45 M Thick)

There were areas of faulting in the 4.45 metre
displacements up to 4 metres. The coal was high
between beds and joints with in the coal, and very
the dozer. The footwall was sandstone and very
monitored for stabilii as the cot progressed.
thick Footwall Coal Zone with
in moisture content, white stains
hard which required ripping with
wet. The footwall was visually

The footwall coal section3 were sub-excavated to increase the volume of footwall
coal mne to the product pile. Total contractor time was:

Dozer Time: 9.5 hours

Excavator Time: 32 hours
Volume: 31OOcubicmetresofcoalatlS%ash
Sampling Results show 18% Ash (See Sample Table 4)

September 2001 Page IS

 COMPLIANCE CO& CORPORATION - BASIN COAL PROJECT
TEST MINING PROGBAM

5.0 TESTSAMPLING

A total of 22 coal samples were collected for analysis from excavated xones and coal
stockpiles. Coal sampling protocols and QA/QC procedures were detined during the
Prognun.

Samples were taken &om each coal seam zone by chip sampling throughout the width and
length of the zone in units of approximately 250 grams each from approximately 20
locations and combined into a plastic bag. Total sample weight was approximately 5 kg.
The bags were sealed and tagged.

The samples were dug out of the core of the seam not close to the surface. They were
taken as the zone was being worked by the dozer or the excavator.

ThePn-%Famwas successti in collecting samples for each coal zone that made up the bulk
sample. These were sent for analysis.

The bulk sample of the combined zones that were mined was taken by digging off the south
end of the stockpile to get a cross section of tbe coal znnes that were layered by the
stackers. The loader trammed 20 buckets of approximately 5 yards each away from the end
to allow access into the core of the stockpile. A representative sample of 10 kg was
collected t?om the crest to the top of the stockpile down the centre of the pile profile.

5.1 Sampling Methodology

Between August 13 and 27,2001,10 kg representative samples of were taken from

all coal zones and bagged and tagged. Sampling of each zone was completed by
chip sampling. All samples were sent by Greyhound Bus to the Birtley Coal Lab in
Calgary. Samples were analyzed for proximate analysis of ash, moisture, volatile
matter, fixed carbon and BTU’s per pound. The reject coal samples remain in
Calgary at the Birtley Lab for potential further testing.

September 2001 Page 17

 COMPJJANCE COAL CORPOBATION - BASIN COAL PROJECF
TEST MlNlNG PROGRAM

A 2 drum (55 gallon) bulk sample was cokcted across the height of the end of the
!i I stockpile using a loader cut face into the product pile (See Table 5). The bulk
sample ‘wastaken to Birtley Lab. for sxeen rmalysis and approximate analysis with
BTU per pound for each size C-actionof 2’, 1*, W, %“, %“, 8 mesh and -8~mesh.
n

Table 5 -Bulk Sample Screen Analysis

it
EEAP RAW ANALYSlS, air drkd basis
MOIST% ASHY. VOLK F.C.X BTulLB BASIS

12.60
2.03 3028
33.94 25.90
29.03 3122
35.00 7,300
8,183 adb
arb
34.64 29.63 35.73 8,353 db

SCREEN SIZE ANALYSIS

I CuMuLATlvE
airdrkdbasis dry bash cab)
WI% %BM %ASH %VOL %F.C BlViLB Wl%@b: ‘U-l% %&S-l BTU/LB w-r?4 ASH%
7.43 2.41 45.43 25.91 26.25 6,486 1.25 7.40 46.55 6,646 7.40 46.55
15.15 I .76 37.33 29.56 31.35 7,668 14.88 15.19 38.00 7,805 22.59 40.80
8.30 1.52 36.114 27.96 34.38 8,062 8.17 8.34 36.70 8,186 30.93 39.69
10.87 1.92 33.~18 28.72 36.18 ’ 8,441 10.66 10.88 33.83 8,606 41.81 38.17
17.93 1.65 31.69 28.95 37.71 8,706 17.63 18.00 32.22 8,852 59.81 36.38
19.67 2.51 29.68 29.13 38.68 8,921 19.18 19.57 30.44 9,151 79.38 34.92
20.65 2.16 34.85 26.86 36.13 8,035 20.20 20.62 35.62 8.212 100.00 35.06

The screen analysis reveals that the plus % inch material requires working to
produce a competitive product. Raw coal from the hauling wall zone may be
competitive for local cement plants when ash content is not a criteria.

lr
.A
September 2001 Page 18
 COMPLUNCE COAL CORPORATlON - BASIN COAL PROJFAX
TEST MJNING PROGRAM

Results of the sample analysis are presented in Table 6 below.

~-Comparative Sample Anl~sis vs. Drill Hole Predictions

Bulk Samples
Simple Average 14.01 20.48 28.98 36.53 8,681 a&
Bulk Sample-Stk Pile 12.82 21.14 29.15 36.90 8,787 arb
Bulk Sample-Customer 9.84 27.09 27.59 35.48 8,298 wb
+&ted-Drill Data 9.43 21.64 2738 40.61 9,118 ,arb

This comparison between the samples taken &m the coal zones as the coal was
mined ‘versus the analysis predicted from drill hole 98-4 is very good. Moistore
content in the samples was much higher and the dampness in the coal seams was
noticed in the field. Field samples were placed immediately in sealed bags while
the drill core may have been partially dried in haudlii and prepamtion prior to
beiog placed in sealed bags. Reduction of moisture in the stockpile and shipping is
co-ed by the reduced moisture content (9.84%) of the coal received by a
customer.

Coal mined as the bulk sample demonstrates that the coal can be selectively mined
to produce a ROM coal product in the 20 percent ash range. This compares to an
overall ash content of about 39 percent for the inplace coal seam reported in the
reserve. The coal quality predicted from the drill holes for the test mining project
compare well with the achlal selectively mined coal. The program confirms that the

Page 19
 COMPLL4NCE COAL CORPORATION -BASIN COAL PROJJKT
TEST MlNING PROGRAM

coal can be mined selectively and that the results compare favourably to the drill
results.

5.2 Sampling QA/QC

All test sampling and handling was completed by Compliance. Analysis was
completed by Sir&y Lab (certified). Results are comparable to previous historical
data ad, therefore, are considered representative of the Basin Coal Deposit as a
whole.

5.3 Spcciflc Gravity/Bdk Density

No specific gravity or bulk density data was collected during the test work. Several
pr&ous samples were analyzed to establish an average SG/bulk density of 1.64
(tim3).

6.0 GEOTECHNICAL

6.1 Rippability

Overburden and p&ings were found to be all rippable using the D-8R dozer. The
best ripping results were found when ripping down-dip perpendicular to bedding
strike.

Some of the coal zones were hard enough that ripping was required.

6.2 cut Slopes

The excavated exposed slope was completed at a 45’ angle in the footwall of the
Footwall Coal Zone. The slope con&s of a thin-bedded siltstone with high
moisture content. No benching was completed for the slope and no life-of-mine
benching is suggested due to the dip and potential undercutting of thin-bedded
sediments.

September 2001 Page 20

 COMPLLUWE COAL CORPORATlON - BASIN COAL PROJlKT
TESTMlNlNGPROGRAM

6.3 Hydrology

High moisture content was noted in the tinal test pit wall suggesting the potential
for developing seeps in the wall as mining progresses. Monitoring of flow from
this fava is suggested 85 mining 6xmthmes. seasoMl high rein and snow vol-
may accelerate tbis flow. The wall will requite monitoring as mining progresses.
Pit crest diversion ditches may assist the mduction of the moisture. As mining
progresses, horizontal drams may be advantageousto reduce pore water pressures
inthefinalwall.

7.0 TEST PROCESSING

After stockpilii of the ROM Coal, a Cat 966 Loader was usad to feed the grizzly ahead of
the screening plant. The equipment was capable of hauling in excess of the 100 tonnes per
hour rate processed. ROM Coal was screened on a 3-inch screen with the undersize
reporting to a smckhtg conveyor. Tha 3” plus was piled and crusbed with a dozer and re-
screened. The 6” plus contained more rock and was not addedto the raw coal stockpile.

The clean coal stockpile was built with each coal zone uniformly layered over the previous
zone to form *consistent pile of all four zones (chevron pattern).

Total volume of the raw coal placed in the stockpile is estimated at 6,480 cubic metres.

8.0 DEMOBILIZATION

The contractor dozer and excavator were demob from site on August 30. The screening
plant and stacker were disassembled and towed off site on August 30.

The loader filled oversize ramps on the pad and regraded them for the B Train truck uuits
that required a larger turning radius.

September 2081 Page21

 COMPLIANCE COAL CORPOlUTlON -RASlN COAL PROJECT
TEST MINING PBOGBAM

9.0 TBANSPORTATION OF COAL

Coalwssloadedwitha966LoadaintoBTraintrucksandcovaed. Eachtruckloadwas
approximately 4,2tonnes and weighed by means of on board air bag load cells. Each truck
was also weighed at the customer’s site scales.

The public portion of the road to Coabnont (0 km to 6 km) is maintained in good condition
bythe~~~ofHighwayswhilethebalanceoftheroad~4kmtolO~was
maintained by Tolko Industries.

Traffic radio control was maintained on all vebiclep due to logging activities above and
below the project site.

Road s&m have been erected by Compliance to caution travelers of heavy haulage tratEc.
Signswerralsocrectedadjacenttotheroadetthtmincsitctoalctttrafficofthelourl
mining activity.

10.0 OPERATING COSTS

The project costs for the planned site program were $99,747 versus the $71,696 budget.
The difference is mainly due to keeping the equipment on site. for the extra week to allow
potential customers to view the operation at their scheduled time.
A summary of actual costs versus budget is as follows in Table 7.
 COMPLIANCE COAL CORPORATION - RASIN COAL PROJECT
TEST MINlNG PROGRAM

Table 7 - Operatiag Coat Summnrv

Equipment Model Equipment Hours COStS

SHr. Phi Actual Plan A&Ill
Dozer Cat D8R $180 82 171 $14,580 $30,780
BXCW8tOI Cat 322 $132 50 154 $6,516 $20,262
Cat 966 $120 82 110 $5,940 $13,140
Power screen $140 80 100 $15,040 $13,210
294 535 $42,076 1677,392
$29.620 $21,395
$71$% $99,747

Production was nmiutahd at a rate of about 100 tonnes per hour of ROM coal. The
equipment combination had extm capacity had the program been ongoing. A large part of
the extra equipment hours came about because of extra stripping with the dozer and the
excavator. Because of the extended program to accommodate potential customers the coal
seam was stripped and prepared for mining in the future. Approximately an extra 60
m&es along strike was prepared for coal extraction.

11.0 CAPITAL COSTS

Minimal capital expenditures were made because all equipment was leased. Capital costs
only iuclnded safety supplies and safety road and site signs.

12.0 CONCLUSIONS AND RECOMMENDATIONS

The test program was very successful with all objectives fulfilled. Mainly the program
confirmed the coal continuity along strike and the quality as predicted from drill data.
Additionally the program confirmed the mining method aud the ability to selectively mine
the various coal zones within the resource.

September 2001 Page 23

COMPLIANCE COAL CORPORATION - BASIN COAL PROJECT
TEST-GPROGRAM

1. Rip overburden down-dip peqwndicular to strike.

2. Monitorwater sourcesmmorewaterwmpresentinthecoaltllananticipated.
3. Construct pit crest diversion ditches.
4. use contractor for olinillg.
5. All costs should be reflected in the Feasibility Study.
6. Utilimti~n of excava@ to selectively mine coal z01y1l and bentoni& partings
7. coal is hard and reqnires ripping.
8. Hdcoalre4#rescNshingforpmwssing.
9. BTraintruckunitscansuccesslllyhaulthecoalonthec-tmimaccess
mad.
COMPLIANCE
COAL
CORPORATIO
Basin
Coal
Project
Test
Mining
Program
-
Appendix
1-Progress
Pictures
 ROY GROUP MINERAL CLAIMS

overlying the

Basin Coal Project [ formerly the Tulameen Project ]

Coal Licences

Detailed Drill Logs with Bentonite Partings

as measured with location drill hole map.

E.W.Beresford P.Eng Aug.2.2002

 Roy Group Mineral Claims - Bentonite Analyses 2001102

Representativesamplesfrom three of the mainbentonitepartingswere takenat a depthof 10

metresfrom the original groundsurfaceandalong 100metresof outcroplength
The bentonitewasminedby excavatorto representa typical mining situationandthe sample
materialwasplacedin barrelsandsentfor analysisto Pacific Soil AnalysisInc. of Richmond.

Resultsof the samplesshowthe bentoniteto be a volcanicashnow alteredto calcium

Montmorilonite andTridymite.
It is relativelypure with no sandyor silty impurities [ analysesattached]

WesternIndustrialClay ProductsLtd of Kamloopshavepreviouslyanalysedsmallersamples

andget similar resultsas the recentbulk samplesentto Pacific Soil AnalysesInc.
WesternIndustrialClay ProductsLtd requesteda 5,000to 8,000tonnebulk test samplefor
processingthroughtheir Kamloopsplant for blendingandmarketingasa cat litter andabsorbent
materialproduct.

Bentonitewould be excavatedduringthe coal mining operationat the Tulameen[ Basin]

propertyand separatelystockpiledfor transportation to Kamloops.
The run of mine coal is waishedin a densemediumplant andit is critical that asmuchbentonite
aspossibleis removedin -pit andremovedfrom the washprocess

Mining of coal andbentoniteis scheduledfor start up at the endof October2002

‘I
E,W,BeresfordP.Eng.
Mining Consultant

October 18,2002 I!
 PACIFIC SOIL ANAliYS~S INC.-
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